[Federal Register: October 15, 2004 (Volume 69, Number 199)]
[Proposed Rules]
[Page 61180-61184]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15oc04-13]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM04-14-000]
Reporting Requirement for Changes in Status for Public Utilities
With Market-Based Rate Authority
Issued October 6, 2004.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Energy Regulatory Commission (Commission), acting
pursuant to section 206 of the Federal Power Act (FPA),\1\ is proposing
to amend its regulations and to modify the market-based rate authority
of current market-based rate sellers to establish a reporting
obligation for changes in status that apply to public utilities
authorized to make wholesale power sales in interstate commerce at
market-based rates. In particular, the Commission proposes to amend its
regulations to establish guidelines concerning the types of events that
trigger this reporting obligation and to modify the market-based rate
authority of current market-based rate sellers to ensure that all such
events are timely reported to the Commission by eliminating the option
to delay reporting of such events until submission of a market-based
rate seller's updated market power analysis. We propose that this
reporting requirement be incorporated into the market-based rate tariff
of each entity that is currently authorized to make sales at market-
based rates, as well as that of all future applicants. The Commission
seeks public comment on its proposal.
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\1\ 16 U.S.C. 824e (2000).
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DATES: Comments are due November 15, 2004.
ADDRESSES: Comments may be filed electronically via the eFiling link on
the Commission's Web site at http://www.ferc.gov. Commenters unable to
file comments electronically must send an original and 14 copies of
their comments to: Federal Energy Regulatory Commission, Office of the
Secretary, 888 First Street, NE., Washington, DC, 20426. Refer to the
Comment Procedures section of the preamble for additional information
on how to file comments.
FOR FURTHER INFORMATION CONTACT:
Brandon Johnson, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426, (202) 502-6143.
Michelle Barnaby, Federal Energy Regulatory Commission, 888 First
Street, NE., Washington, DC 20426, (202) 502-8407.
SUPPLEMENTARY INFORMATION: Before Commissioners: Pat Wood, III,
Chairman; Nora Mead Brownell, Joseph T. Kelliher, and Suedeen G. Kelly.
Notice of Proposed Rulemaking
Introduction
1. In order to facilitate our oversight of public utilities with
market-based rate authority, to ensure that the rates being charged
continue to be just and reasonable and to give guidance to market
participants to facilitate compliance with the Commission's reporting
requirements, this Notice of Proposed Rulemaking proposes to
standardize and clarify market-based rate sellers' reporting
requirement for changes in status. In previous orders authorizing
wholesale power sales in interstate commerce at market-based rates, the
Commission has required market-based rate sellers to inform the
[[Page 61181]]
Commission of any change in status that would reflect a departure from
the characteristics the Commission relied upon in authorizing sales at
market-based rates. Some sellers were given the option of filing a new
market analysis every three years in lieu of reporting changes in
status on an ongoing basis. Others were given the option to report such
changes every three years in conjunction with an updated market
analysis. With respect to the events that qualify as a change in
status, the Commission has stated that they include, but are not
limited to: (1) Ownership of generation or transmission facilities or
inputs to electric power production other than fuel supplies; or (2)
affiliation with any entity not disclosed in the filing that owns
generation or transmission facilities or inputs to electric power
production or affiliation with any entity that has a franchised service
area.
2. We propose to impose uniform standards on all market-based rate
sellers by eliminating the option to delay reporting changes in status
until submission of the triennial review, or to file a triennial review
in lieu of reporting changes in status as they occur. To that end,
acting pursuant to section 206 of the FPA, we propose to amend our
regulations and to modify the market-based rate authority of current
market-based rate sellers to include the requirement to timely report
to the Commission any change in status that would reflect a departure
from the characteristics the Commission relied upon in granting market-
based rate authority. We propose that this reporting requirement be
incorporated into the market-based rate tariff of each entity that is
currently authorized to make sales at market-based rates, as well as
that of all future applicants. We propose that notice of such changes
in status be filed no later than 30 days after the change in status
occurs. As discussed below, we seek public comment on our proposal.
Background
3. The Commission has a statutory duty under the FPA to ensure that
rates charged by public utilities authorized to make wholesale sales in
interstate commerce at market-based rates are just and reasonable.\2\
The Commission uses a four-part test to determine whether to grant a
public utility market-based rate authority. That test examines whether
the applicant or its affiliates possess the potential to exercise
market power by considering generation market power, transmission
market power, barriers to entry, and the potential for affiliate abuse
or reciprocal dealing. Sellers authorized to make sales at market-based
rates are then required to file electric quarterly reports containing a
summary of the contractual terms and conditions in every effective
service agreement for market-based power sales and transaction
information for their market-based rate sales during the most recent
calendar quarter.\3\
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\2\ 16 U.S.C. 824d(a) (2000).
\3\ Revised Public Utility Filing Requirements, Order No. 2001,
67 FR 31043 (May 8, 2002), III FERC Stats. & Regs. ] 31,127 (Apr.
25, 2002). The required data sets for contractual and transaction
information are described in Attachments B and C of Order No. 2001.
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4. The Commission has also required that market-based rate sellers
report any changes in status that would reflect a departure from the
characteristics the Commission relied upon in its existing grant of
market-based rate authority. When the Commission first granted market-
based rate authorizations, it required traditional utilities that
satisfied the Commission's initial market power review to file an
updated market power analysis every three years to allow the Commission
to monitor competitive conditions and to determine whether the
applicants still satisfied our market power concerns.\4\ Power
marketers, on the other hand, were required to promptly notify the
Commission of changes in status.\5\ Subsequently, the Commission has
allowed market-based-rate sellers to choose between promptly reporting
changes in status, filing a three-year update in lieu of reporting
changes in status as they occurred,\6\ or reporting such changes in
conjunction with the updated market analysis.\7\ The Commission
reserved the right to require such an analysis at any time. The
Commission proposes to continue to reserve this right.
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\4\ See, e.g., Entergy Services, Inc., 58 FERC ] 61,234 (1992);
Louisville Gas & Electric, 62 FERC ] 61,016 (1993).
\5\ See, e.g., Citizens Power & Light Corporation, 48 FERC ]
61,210 (1989); Enron Power Marketing, 65 FERC ] 61,305 (1993);
InterCoast Power Marketing Co., 68 FERC ] 61,248 (1994).
\6\ See, e.g., Morgan Stanley Capital Group, Inc., 69 FERC ]
61,175 (1994).
\7\ See, e.g., AEP Power Marketing, Inc., 76 FERC ] 61,307 at
62,516 (1996); Montaup Electric Co., 85 FERC ] 61,313 at 62,232
(1998); Sithe/Independence Power Partners, 101 FERC ] 61,210 at
61,907 (2002).
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5. To carry out its statutory duty under the FPA to ensure that
market-based rates are just and reasonable, the Commission must rely on
market-based rate sellers to provide accurate, up-to-date information
regarding any relevant changes in status, such as ownership or control
of jurisdictional facilities and affiliate relationships. In contrast
to when the Commission first began to authorize market-based rate
sales, wholesale markets now have many more sellers of different types
(e.g., independent power producers, power marketers, affiliated
generators). As markets have expanded and developed, both the number
and types of sellers have increased and the complexity of wholesale
markets has increased. Furthermore, market structure is rapidly
evolving due to restructuring, corporate realignments and new types of
contractual and subcontracting arrangements, in which utilities
increasingly grant other firms control and/or influence over managing
various aspects of their business such as power marketing. In light of
these structural changes, the Commission has concluded that more timely
reporting of changes in status is necessary.
6. We believe that, in today's electric industry, granting market-
based rate sellers the option to delay reporting changes in status by
up to three years does not provide the Commission with sufficient
information to provide effective oversight of electricity markets.
7. Therefore, the Commission proposes to eliminate the option to
delay reporting changes in status until the next triennial review, or
to file a triennial review in lieu of promptly reporting changes in
status, and to standardize the change in status reporting requirement.
Accordingly, the proposed regulations would require that, as a
condition of obtaining and retaining market-based rate authority, all
sellers will be required to timely report to the Commission any change
in status that would reflect a departure from the characteristics the
Commission relied upon in granting market-based rate authority.
8. With respect to the types of events that should trigger the
reporting obligation, the Commission proposes that, as an initial
matter, the following events would qualify as changes in status: (1)
Ownership or control of generation or transmission facilities or inputs
to electric power production; or (2) affiliation with any entity not
disclosed in the filing that owns or controls generation or
transmission facilities or inputs to electric power production or
affiliation with any entity that has a franchised service area.\8\
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\8\ The Commission's regulations define ``affiliated companies''
as ``companies or persons that directly, or indirectly through one
or more intermediaries, control, or are controlled by, or are under
common control with, the [subject] company.'' 18 CFR 101 (2004). See
also 18 CFR 161.2 (2004); Morgan Stanley Capital Group, et al., 72
FERC ] 61,082 (1995).
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[[Page 61182]]
9. Although the market-based rate change in status provision has
not specifically referenced ``control'' of assets, we have historically
considered control of an asset to be a factor on which we rely in
granting market-based rate authority. In order to eliminate any market
uncertainty, we propose that the regulations specifically reference
``control'' as well as ownership as a factor relied upon by the
Commission. In the Commission's early orders granting market-based rate
authority, we acknowledged that sellers may exercise market power
through contractual arrangements granting them control of generation or
transmission facilities just as effectively as they could through
ownership.\9\ Similarly, the Commission's guidelines for the assessment
of mergers and its generation market power analysis for market-based
rate authority provide that, for the purposes of the market power
analysis, the capacity associated with contracts that confer
operational control of a given facility to an entity other than the
owner must be assigned to the entity exercising control over that
facility, rather than to the entity that is the legal owner of the
facility.\10\ In addition, with respect to notifications of changes in
status, the Commission has found that an entity controls the facilities
of another when it controls the decision-making authority over sales of
electric energy, including discretion as to how, when and to whom it
could sell power generated by these facilities.\11\
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\9\ See, e.g., Citizens Power & Light Corp., 48 FERC ] 61,210
(1989). In this order, we stated that: ``[u]sually, the source of
market power is dominant or exclusive ownership of the facilities.
However, market power also may be gained without ownership.
Contracts can confer the same rights of control. Entities with
contractual control over transmission facilities can withhold supply
and extract monopoly prices just as effectively as those who control
facilities through ownership.''
\10\ See AEP Power Marketing, Inc., et al., 107 FERC ] 61,018 at
P 95 (2004), order on reh'g, 108 FERC ] 61,026 at P 65 (2004);
Inquiry Concerning the Commission's Merger Policy Under the Federal
Power Act: Policy Statement, Order No. 592, 61 FR 68595 (1996), FERC
Stats. & Regs., Regulations Preambles July 1996-December 2000 ]
31,044 (1996), reconsideration denied, Order No. 592-A, 62 FR 33341
(1997), 79 FERC ] 61,321 (1997) (Merger Policy Statement); see also
Revised Filing Requirements Under Part 33 of the Commission's
Regulations, Order No. 642, 65 FR 70983 (2000), FERC Stats. & Regs.,
Regulations Preambles July 1996-December 2000 ] 31,111 at note 39
(2000), order on reh'g, Order No. 642-A, 66 FR 16121 (2001), 94 FERC
] 61,289 (2001).
\11\ El Paso Electric Power Co., et al., 108 FERC ] 61,071 at P
14 (2004), reh'g pending.
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10. The Commission's general practice has been to require
notifications of changes in status when the market-based rate applicant
obtained ownership of new inputs to electric power production, other
than fuel supplies. However, since the Commission is interested in
being informed of significant acquisition of ownership or control of
any inputs to electric power production, we propose to require a
reporting obligation to this effect. The Commission seeks comments on
this proposal.
11. We recognize that the language in the proposed regulations may
be susceptible to different interpretations among market-based rate
sellers concerning the scope of their reporting requirement.
Accordingly, we seek public comment as to whether and how this language
should be modified to ensure that the types of changes in status that
could impact the continued basis of a grant of market-based rate
authority are identified and timely reported to the Commission.
12. For example, should there be a threshold level of increases in
generation (such as generation addition through acquisition, self-
build, long-term power purchases, repowering) that would trigger the
reporting requirement? If so, what amount of increase in generation
should trigger the reporting requirement?
13. Should the applicant have a reporting requirement if portions
of the applicant's transmission system are taken out of service for a
significant period of time (thus potentially affecting the scope of the
relevant geographic market)? If so, what criteria should trigger this
reporting requirement?
14. Beyond ownership or control of generation or transmission
facilities or inputs to electric power production and affiliation with
any entity not disclosed in the filing that owns or controls generation
or transmission facilities or inputs to electric power production or
affiliation with any entity that has a franchised service area, we seek
comment as to whether there are other arrangements, contractual or
otherwise, that should be promptly reported to the Commission. For
example:
What types of arrangements, contractual or otherwise, do
market-based rate sellers enter into that could cause a need for the
Commission to revisit the continuing basis of the grant of market-based
rate authority for such sellers?
What threshold of materiality, if any, of such
arrangements should be met before such arrangements need be reported to
the Commission?
Should marketing alliances, brokering arrangements,
tolling agreements or other sales-oriented arrangements be reported?
15. With respect to the form and content of such reports, we
propose that the market-based rate seller be required to submit a
transmittal letter including a description of the change in status and
a narrative explaining whether (and, if so, how) this change in status
reflects a departure from the characteristics relied upon by the
Commission in originally granting the seller market-based rate
authority, in particular whether the change in status affects the
results of any of the prongs of the four-part test that the Commission
uses to determine whether a public utility qualifies for market-based
rate authority (i.e. generation market power, transmission market
power, barriers to entry, affiliate abuse/reciprocal dealing). If the
market-based rate seller believes that a change in status does not
affect the continuing basis of the Commission's grant of market-based
rate authority, it should clearly state the reasons on which it bases
this conclusion.
16. In addition to including this reporting requirement in the
Commission's regulations, we propose that this reporting requirement be
incorporated into the market-based rate tariff of each entity that is
currently authorized to make sales at market-based rates, as well as
that of all future applicants. Market-based rate sellers would be
required to submit a conforming provision to their market-based rate
tariffs at the time that they file any amendment to their tariffs or
(if earlier) when they apply for continued authorization to sell at
market-based rates (e.g., in their three-year updated market power
analysis). However, the Commission proposes that the obligation to
report be effective at the time that the Final Rule becomes effective.
17. With respect to the procedures for reporting notifications of
changes in status, the proposed rule requires that such notifications
be filed no later than 30 days after the occurrence of the triggering
event. We seek comment as to whether this proposed time period is
appropriate.
Information Collection Statement
18. Office of Management and Budget (OMB) regulations require OMB
to approve certain information collection requirements imposed by
agency rule.\12\ Comments are solicited on the Commission's need for
this information, whether the information will have practical utility,
the accuracy of provided burden estimates, ways to enhance the quality,
utility and clarity of the information to be collected, and any
suggested methods for minimizing
[[Page 61183]]
respondents' burden, including the use of automated information
techniques.
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\12\ 5 CFR 1320.11 (2004).
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19. Estimated Annual Burden: To satisfy the reporting requirement,
the Commission expects respondents to submit a transmittal letter
including a description of the change in status and a narrative
explaining whether (and, if so, how) this change in status reflects a
departure from the characteristics relied upon by the Commission in
originally granting the seller market-based rate authority. The
Commission estimates that, on average, it will take respondents six
hours per response and that approximately 25 percent of current market-
based rate sellers would experience a change in status in any given
year.
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Number of Number of Number of Total annual
Data collection respondents hours responses hours
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FERC-516........................................ 1,238 6 .20 1,486
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Title: Electric Rate Schedules and Filings, Reporting Requirement
for Changes in Status For Public Utilities With Market-Based Rate
Authority (FERC-516).
Action: Proposed Collection.
OMB Control No.: 1902-0096.
Respondents: Businesses or other for profit.
Frequency of Responses: On occasion.
Necessity of Information: The proposed regulations will revise
market-based rate sellers' reporting obligation and are intended to
ensure that rates and terms of service offered by market-based rate
sellers remain just and reasonable.
Internal review: The Commission has reviewed the proposed amendment
to its regulations to establish a reporting obligation for changes in
status and has determined that these regulations are necessary to
ensure just and reasonable rates. These regulations, moreover, conform
to the Commission's plan for efficient information collection,
communication, and management within the electric utility industry. The
Commission has assured itself, by means of internal review, that there
is specific, objective support for the burden estimates associated with
the information/data retention requirements.
20. Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street, NE, Washington, DC 20426, Attention: Michael Miller,
Office of the Executive Director, phone: (202) 502-8415, fax: (202)
273-0873, e-mail: michael.miller@ferc.gov. Comments on the proposed
requirements of the subject rule may also be sent to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington, DC 20503, Attention: Desk Officer for the Federal Energy
Regulatory Commission, phone: (202) 395-4650.
Environmental Analysis
21. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\13\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that are clarifying,
corrective, or procedural or that do not substantially change the
effect of the regulations being amended.\14\ This proposed rule, if
finalized, is procedural in nature and therefore falls under this
exception; consequently, no environmental consideration would be
necessary.
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\13\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 ] 30,783 (Dec. 10, 1987).
\14\ 18 CFR 380.4(a)(2)(ii) (2004).
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Regulatory Flexibility Act Certification
22. The Regulatory Flexibility Act of 1980 (RFA)\15\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small
entities.\16\ The Commission is not required to make such analyses if a
rule would not have such an effect.
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\15\ 5 U.S.C. 601-612 (2000).
\16\ The RFA definition of ``small entity'' refers to the
definition provided in the Small Business Act, which defines a
``small business concern'' as a business which is independently
owned and operated and which is not dominant in its field of
operation. 15 U.S.C. 632 (2000). The Small Business Size Standards
component of the North American Industry Classification System
defines a small electric utility as one that, including its
affiliates, is primarily engaged in the generation, transmission,
and/or distribution of electric energy for sale and whose total
electric output for the preceding fiscal years did not exceed 4
million MWh. 13 CFR 121.201 (Section 22, Utilities, North American
Industry Classification System, NAICS) (2004).
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23. The Commission does not believe that the proposed amendment to
our regulations would have such an impact on small entities. Based on
past experience, most of the sellers having changes in status that
would likely trigger a filing under the proposed regulations would be
entities that do not meet the RFA's definition of a small entity.
Therefore, the Commission certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
Comment Procedures
24. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due November 15, 2004. Comments must refer to
Docket No. RM04-14-000, and must include the commenter's name, the
organization they represent, if applicable, and their address in their
comments.
25. Comments may be filed electronically via the eFiling link on
the Commission's Web site at http://www.ferc.gov. The Commission
accepts most standard word processing formats and commenters may attach
additional files with supporting information in certain other file
formats. Commenters filing electronically do not need to make a paper
filing. Commenters that are not able to file comments electronically
must send an original and 14 copies of their comments to: Federal
Energy Regulatory Commission, Office of the Secretary, 888 First Street
NE., Washington, DC 20426.
26. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this proposal are
not required to serve copies of their comments on other commenters.
Document Availability
27. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m.
Eastern time) at 888 First
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Street, NE., Room 2A, Washington, DC 20426.
28. From FERC's Home Page on the Internet, this information is
available in the Commission's document management system, eLibrary. The
full text of this document is available on eLibrary in PDF and
Microsoft Word format for viewing, printing, and/or downloading. To
access this document in eLibrary, type the docket number excluding the
last three digits of this document in the docket number field.
29. User assistance is available for eLibrary and the FERC's
website during normal business hours. For assistance, please contact
FERC Online Support at 1-866-208-3676 (toll free) or 202-502-6652 (e-
mail at FERCOnlineSupport@FERC.gov), or the Public Reference Room at
202-502-8371, TTY 202-502-8659 (e-mail at
public.referenceroom@ferc.gov).
List of Subjects in 18 CFR Part 35
Electric power, Reporting and recordkeeping requirements.
By direction of the Commission.
Magalie R. Salas,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
Part 35, Chapter I, Title 18 of the Code of Federal Regulations, as set
forth below:
PART 35--FILING OF RATE SCHEDULES AND TARIFFS
1. The authority citation for part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
2. In Sec. 35.27, paragraph (c) is added to read as follows:
Sec. 35.27 Power sales at market-based rates.
* * * * *
(c) Reporting requirement. Any public utility with the authority to
engage in sales for resale of electric energy in interstate commerce at
market-based rates shall be subject to the following:
(1) As a condition of obtaining and retaining market-based rate
authority, a public utility with market-based rate authority must
timely report to the Commission any change in status that would reflect
a departure from the characteristics the Commission relied upon in
granting market-based rate authority. A change in status includes, but
is not limited to each of the following:
(i) Ownership or control of generation or transmission facilities
or inputs to electric power production, or
(ii) Affiliation with any entity not disclosed in the application
for market-based rate authority that owns or controls generation or
transmission facilities or inputs to electric power production or
affiliation with any entity that has a franchised service area.
(2) Any change in status subject to paragraph (c)(1) of this
section must be filed no later than 30 days after the change in status
occurs.
[FR Doc. 04-23136 Filed 10-14-04; 8:45 am]
BILLING CODE 6717-01-P